Introduction
Wal-Mart stores operate on an “Every Day Low Price” philosophy offering a wide variety of general merchandise. Wal-Mart stores offer pleasant and convenient shopping in 36 departments including family apparel, health & beauty aids, household needs, electronics, toys, fabrics & crafts, lawn & garden, jewelry and shoes. In addition, some Wal-Mart stores offer a Pharmacy Department, Tire & Lube Express, garden center, snack bar or restaurant, Vision Center and One-Hour Photo Processing for customer convenience.
Background
Today Wal-Mart is a general merchandise discount retailer, which was incorporated in 1962. Wal-Mart’s history is based on one man, Sam Walton, who changed the course of retailing forever. Sam Walton first entered retailing when he was a management trainee at J.C. Penny Co. in 1940 in Des Moines, Iowa. In 1962, Sam Walton opened the first Wal-Mart in Rogers Arkansas; no one could have ever predicted the enormous success this small- town merchant would have. In 1978, the first distribution center was built, followed by the first Wal-Mart Supercenter in 1983 and a Sam’s Club in 1988. In 1989 Wal-Mart was name the “Retailer of the Decade”, and on several occasions has been included in Fortune’s List of the “10 most admired corporations”.
Important to Walton, and ultimately Wal-Mart, are certain philosophies that were amounted over time. Walton held these values tightly, and engrained them in the Wal-Mart cultures. This included referring to employees as “associates”, serving the public to their complete satisfaction, and receiving a fair profit from services rendered. He believed in listening to employees and challenging them to come up with ideas and suggestions to make the company better. At each of the Wal-Mart stores, signs are displayed which read, “Our People Make the Difference.”
Planning
Walton’s theory on what Wal-Mart should be is “a conveniently located one-stop shopping unit where customers could buy a wide variety of quality merchandise at discount prices.” Another one of Wal-Mart’s goals was to provide its employees with the appropriate tools to do their jobs efficiently. The technology was not used as means as a means of replacing existing employees, but to provide them with a means to succeed in the retail market (Thompson ; Strickland, 1995) And as Wal-Mart grew, management sought a firm that was a “discount department store chain offering a wide variety of general merchandise to the customer.” Walton was a man of simple tastes and took a keen interest in people.
He believed in three guiding principles:
1. Customer value and service;
2. Partnership with its associates;
3. Community involvement (The Story of Wal-Mart, 2001).
Walton’s greatest accomplishment was his ability to empower, enrich, and train his employees (Longo1994).Wal-Mart has grown above and beyond the Arkansas store that opened thirty-nine years ago. Wal-Mart’s popularity can be linked to its hometown identity. Walton believed that every customer should be greeted upon entering a store, and that each store should be a reflection of the values of its customers and its community. Wal-Mart is involved in many community outreach programs and has launched several national efforts through industrial development grants.
What are the Key Features of Wal-Mart’s Approach to Implementing the Strategy Put Together by Sam Walton — The key features of Wal-Mart’s approach to implementing the strategy put together by Sam Walton emphasizes building solid working relationships with both suppliers and employees, being aware and taking notice of the most intricate details in store layouts and merchandising techniques, capitalizing on every cost saving opportunity, and creating a high performance spirit.
This strategic formula is used to provide customers access to quality goods, to make these goods available when and where customers want them, to develop a cost structure that enables competitive pricing, and to build and maintain a reputation for absolute trustworthiness (Stalk, Evan, ; Shulman, 1992). Wal-Mart stores operate according to their “Everyday Low Price” philosophy. Wal-Mart has emerged as the industry leader because it has been better at containing its costs, which has allowed it to pass on the savings to its customers. Wal-Mart has become a capability competitor.
It continues to improve upon its key business processes, managing them centrally and investing in them heavily for the long-term payback. Wal-Mart has been regarded as an industry leader in “testing, adapting, and applying a wide range of cutting-edge merchandising approaches” (Thompson ; Strickland, 1995, p. 860). Walton proved to be a visionary leader and was known for his ability to quickly learn from his competitors’ successes and failures. In fact, the founder of Kmart once claimed that Walton “not only copied our concepts, he strengthened them. Sam just took the ball and ran with it” (Thompson & Strickland, 1995, p. 859).
SWOT Analysis Wal-Mart has numerous strengths and weaknesses that must be analyzed to better understand their industry. Wal-Mart’s specific target market ranges from 25 years old and up. Wal-Mart targets the family oriented consumer who is looking for a good value at a low price. Taking an overview look at Wal-Mart, an individual may see an immense amount of strengths and opportunities for the company. However, there are some weaknesses and threats that must be considered in order to continue their success. Wal-Mart is the largest discount department store chain in the nation beating out many different competitors. It is believed that one of Wal-Mart’s most valuable strengths is their mission statement set by their late CEO and founder, Sam Walton.
He set the company’s values on which the store would operate with to continue success in the future. Wal-Mart continues to grow to many different regions of the world and is a well-known retail chain among consumers internationally. Wal-Mart has excellent distribution channels throughout the country. Wal-Mart has a distribution warehouse no more than six hours from any of its stores location. Additionally, the fact that they do not have to pay outside shipping companies to deliver the goods to the stores saves a considerable amount of money on their distribution costs.
However, despite Wal-Mart’s strengths, the company also has weaknesses that need to be addressed. One of their weaknesses is the company’s strong focus on a lower price strategy that often gives the consumer a perception of goods and services of poor quality. Also, some consumers view Wal-Mart as mom and pop killers when they build a new superstore in a small town. Many consumers value their personal relationships with hometown department stores and would not like to see them eliminated. A dollar must circulate several times within a community in order for there to be a good local economy. Most of Wal-Mart’s dollars leave the local community aside from their employees salary’s.
This trend eventually makes a community poorer over time. Finally, most of Wal-Mart’s competition competes on many of the same elements, such as price, promotion, distribution, and products. This makes it harder to gain a competitive advantage for Wal-Mart. Wal-Mart has many opportunities it may consider to pursue for its future success. The international marketplace is the trend of the future for many companies. Wal-Mart has started to expand overseas with limited success. However, it will take a certain time period for consumers to adapt to Wal-Mart’s concepts. Another opportunity may be to expand their Sam’s Club stores and their Superstores because they are very profitable for the company.
A final opportunity is if Wal-Mart could emerge more into the urban marketplace, they would definitely see solid returns. The major barrier to entry in urban areas is the price of real estate required for their storefront. Although it seems that Wal-Mart has few threats to consider, it must still consider them in order to remain one of the best in the industry. The discount variety store industry is a fiercely competing marketplace and the big players are always strategically placed to gain new customers from the competition. Wal-Mart must keep an eye on its competitors, such as Kmart, Sears and Target. Another threat to Wal-Mart is factory stores that offer consumers the alternative of brand names at a lower price. Plus, Wal-Mart must also be aware of specialty retailers, such as Toys’R’Us and Home Depot. The specialty retailers can often offer a wider variety of specific product categories and lower prices.
SWOT ANALYSIS Strengths
A company with a very defined mission set by Sam WaltonDistribution stores no more than 6 hours away from warehouseOffers a variety of merchandiseConstant expansion over lifetime of companyLow prices Inventory Control system is the best in retail industryWeaknessesLow prices can portray a cheap image to consumerDestroying community Mom and Pop storesOver exposure to many close marketsInternational expansionEmployee trainingOpportunitiesPartnership with other businesses to house in storeDesign better store layouts with competitionExpand their Sam’s Club stores and their SuperstoresMerge into the urban marketplaceThreatsTo enter the Urban MarketGetting caught in prices wars with competitionKmart, Sears, and TargetFactory Outlet storesEconomic uncertainty and buying patterns of consumersOrganizing:Wal-Mart has invested heavily in its unique cross-docking inventory system. Cross docking has enabled Wal-Mart to achieve economies of scale, which reduces its costs of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Cross docking gives the individual managers more control at the store level. A company owned transportation system also assists Wal-Mart in shipping goods from warehouse to store in less than 48 hours. This allows Wal-Mart to replenish the shelves 4 times faster than its competition. Wal-Mart owns the largest and most sophisticated computer system in the private sector. It uses a MPP (massively parallel processor) computer system to track stock and movement which keeps it abreast of fast changes in the market (Daugherty, 1993). Information related to sales and inventory is disseminated via its advanced satellite communications system. Wal-Mart has leveraged its volume buying power with its suppliers. It negotiates the best prices from its vendors and expects commitments of quality merchandise (Thompson ; Strickland, 1995). The purchasing agents of Wal-Mart are very focused people. “Their highest priority is making sure everybody at all times in all cases knows who’s in charge, and it’s Wal-Mart” (Vance, 1990, p. 32). “Even though Wal-Mart was tough in negotiating for absolute rock-bottom prices, the company worked closely with suppliers to develop mutual respect and to forge long-term partnerships that benefited both parties” (Thompson ; Strickland, 1995, p. 866). Wal-Mart built an automated reordering system linking computers between Procter ; Gamble (“P&G”) and its stores and distribution centers. The computer system sends a signal from a store to P;G identifying an item low in stock. It then sends a resupply order, via satellite, to the nearest P;G factory, which then ships the item to a Wal-Mart distribution center or directly to the store. This interaction between Wal-Mart and P;G is a win-win proposition because with better coordination, P;G can lower its costs and pass some of the savings on to Wal-Mart. Sam Walton received national attention through his “Buy America” policy. Through this plan, Wal-Mart encourages its buyers and merchandise managers to stock stores with American-made products. In a 1993 annual report management stated the “program demonstrates a long-standing Wal-Mart commitment to our customers that we will buy American-made products whenever we can if those products deliver the same quality and affordability as their foreign-made counterparts” (Thompson ; Strickland, 1995, p. 868). Company OfficersDirectors: Jim W. BreyerJ. Paul ReasonJohn T. Chambers Elizabeth A. SandersThomas M. CoughlinH. Lee ScottStephen FriedmanJack C. ShewmakerStanley C. GaultDonald G. Soderquist David D. GlassJose VillarrealRoland HernandezJohn T. WaltonDawn G. LeporeS. Robson WaltonSenior Officers: S. Robson WaltonChairman of the board, Wal-Mart Stores, Inc.Don HarrisExecutive vice president, general merchandise,Wal-Mart Stores division, Wal-Mart Stores, Inc.
David D. GlassChairman, executive committee of the board, Wal-Mart Stores, Inc.Jim HaworthExecutive vice president, operations,Wal-Mart Stores, Inc.
H. Lee ScottPresident and chief executive officer,Wal-Mart Stores, Inc.Craig HerkertExecutive vice president; vice president and chief operating officer,International division,Wal-Mart Stores, Inc.
Thomas M. CoughlinPresident and chief executive officer, Wal-Mart Stores divisionThomas HydeExecutive vice president, senior general counsel, Wal-Mart Stores, Inc.
Paul R. CarterExecutive vice president, Wal-Mart Stores, Inc.President, Wal-Mart RealtyJohn B. MenzerExecutive vice president; president and chief executive officer,International division,Wal-Mart Stores, Inc.
Bob ConnollyExecutive vice president,marketing and consumer communications,Wal-Mart Stores, Inc.Coleman PetersonExecutive vice president, people division,Wal-Mart Stores, Inc.
Doug DegnExecutive vice president, food merchandising, Wal-Mart Stores, Inc.Robert K. RhoadsSenior vice president,general counsel and secretary,Wal-Mart Stores, Inc.
David DibleExecutive vice president, specialty division, Wal-Mart Stores, Inc.Thomas M. SchoeweExecutive vice president and chief financial officer,Wal-Mart Stores, Inc.
Michael DukeExecutive vice president, administration,Wal-Mart Stores, Inc.Phil SutterfieldExecutive vice president, merchandising,SAM’S CLUBJ. J. FitzsimmonsSenior vice president,finance and treasurer,Wal-Mart Stores, Inc.Celia SwansonExecutive vice president, membership, marketing and administration, SAM’S CLUBThomas GrimmPresident ; chief executive office,rSAM’S CLUBKevin TurnerExecutive vice president and chief information officer,Wal-Mart Stores, IncLeadingEnvironmental concerns are important to Wal-Mart. A prototype store was opened in Lawrence, Kansas, which was designed to be environmentally friendly. The store contains environmental education and recycling centers (Slezak, 1993). Wal-Mart has also adopted the low cost theme for its facilities. All offices, including the corporate headquarters, are built economically and furnished simply. To conserve energy, temperature controls are connected via computer to headquarters. Through these programs, Wal-Mart shows its concern for the community. Wal-Mart has been led from the top but run from the bottom, a strategy developed by Sam Walton and carried on by a small group of senior executives led by CEO David Glass. During 2000, Wal-Mart and SAM CLUB associates contributed $1.3 million in environmental grants to school and communities to help improve, beauty or preserve the environment. To add to the recycling more than 11.3 million pounds of plastic and more than 1 million tons of cardboard were collected from communities through Wal-Mart’s recycling programs in 2000 (www.walmart.com). Customers also can recycle blue shopping bags and rechargeable batteries at any stores. Although recent growth has led Wal-Mart to add more management layers, senior executives strive to maintain its unique culture. This culture, described as “one part Southern Baptist evangelism, one part University of Arkansas Razorback teamwork, and one part IBM hardware” has worked to Wal-Mart’s advantage (Saporito, 1994, p. 62). Just how Successful is Wal-Mart? — A forecast of Wal-Mart’s income for the period 1995-2000, considering increases of 30.6% in Net Sales, 27.7% in Operating Expenses, and 52.3% in Interest Debt (a level which is below Wal-Mart’s historically compounded growth rate of 55.6%) indicates that the company should continue to report gains each year until 2005. According to most analysts and company projections, sales should approximate $115 billion by 1996, representing an increase of 30.6% as compared to 1995. If the company continues at this pace, sales should reach $334 billion by the year 2005. The growth on sales that Wal-Mart reported during the 1980s and the beginning of the 1990s will be difficult to repeat, especially considering the ever-changing marketplace in which it competes. In an interview, Bill Fields, President of the Stores Division said, “Wal-Mart is now seeing price pressure from companies that once assiduously avoided taking it on. These include specialty retailers such as Limited, category killers like Home Depot and Circuit City, and catalog companies like Spiegel. I think everybody prices off of Wal-Mart. You’ve got Limited reaching levels we’d thought they’d never get to. The result is that everyday low prices are getting lower” (Saporito, 1994, p. 66). In addition, the baby-boomers are reaching their peak earnings years, when financial and personal priorities change. Thus, savings, not spending, will likely take precedence because most baby-boomers are approaching retirement. Based on Wal-Mart’s position in 1994, which was considered a year of expansion for the company, (Wal-Mart added 103 new discount stores, 38 “Super-centers”, 163 warehouse clubs, and 94,000 new associates) interest debt increased 52.3%. The cost paid by Wal-Mart to finance property plants and equipment forced the company to increase long term debt by 4.6 times during the period 1991-1995. Long-term debt for 1995 is $7.9 billion. Operating expenses will be a key strategic issue for Wal-Mart in order to maintain its position in the market. The challenge is how to run more stores with less operating expenses. According to Bill Fields,”. . . the goal is to increase sales per square foot and drive operating costs down yet another notch” (Saporito, 1994, p. 66). Trends indicate that operating expenses have been growing at a rate of 27.7% in recent years. However, Wal-Mart should reap the benefits of its investments in high technology, and be able to operate more stores without increasing its expenses. Cost of sales historically has been equal to the level of sales. If the company continues to take advantage of its buying power, Wal-Mart can expect to lower its cost of sales. Wal-Mart’s future will depend on how well the company manages its expansion plans. For the coming years, the company will need to justify its expansion plans with consistent growth in sales, in order to offset the increases in debt interest and operating expenses. ControllingWhat Problems are ahead for Wal-Mart? What Risks? — Throughout the 1980s, Wal-Mart’s strategic intent was to unseat industry leaders Sears and Kmart, and become the largest retailer in the U.S. Wal-Mart accomplished this goal in 1991. But Wal-Mart’s current strong competitive position and its past rapid growth performance can’t guarantee that the company will remain as the industry leader or maintain its strong business position in the future. Carol Farmer, a retail consultant, told the Wall Street Journal that, “One little bad thing can wipe out lots of good things” (Trimble, 1990, p. 267). Every move in its business operation ought to be well thought-out and executed. Wal-Mart needs to address two major areas in order to maintain or to capture an even stronger long-term business position: 1) Single-business strategy — Wal-Mart’s success is mainly based on its concentration of a single-business strategy. This strategy has achieved enviable success over the last three decades without relying upon diversification to sustain its growth and competitive advantages. Given its current position in the industry, Wal-Mart may want to continue its single-business strategy and to push hard to maintain and increase market share. However, there is risk in this strategy, because concentration on a single-business strategy is similar to “putting all of a firm’s eggs in one industry basket” (Thompson & Strickland, 1995, p. 187). In other words, if the retail industry stagnates due to an economic downturn, Wal-Mart might have difficulty achieving past profit performance. Also, if Wal-Mart continues to follow Sam Walton’s vision of expansion, Wal-Mart will reach its peak in the very near future. When it does, its growth will start to slow down and the company will need to turn its strategic attention to diversification for future growth. Social responsibility — Retail stores can compete on several bases: service, price, exclusivity, quality, and fashion. Wal-Mart has been extremely successful in competing in the retail industry by combining service, price, and quality. However, other merchants may object to Wal-Mart’s entry into their community. Because of its ability to out-price smaller competitors, Wal-Mart’s stores threaten smaller neighborhood stores which can only survive if they offer merchandise or services unavailable anywhere else. This makes it very hard for small businesses, such as “mom-and-pop” enterprises, to survive. They, therefore, fight to keep Wal-Mart from entering their locales. Numerous studies conducted in different states both support and criticize Wal-Mart (Verdisco, 1994). Nevertheless, Wal-Mart did drive local merchants out of business when it opened up stores in the same neighborhood. As a result, more and more rural communities are waging war against Wal-Mart’s entrance into their market. Besides protesting and signing petitions to attempt to stop Wal-Mart’s entry into their community, the opposition’s efforts can even be found on The Internet. Gig Harbor, a small town in Washington, recently started a World Wide Web page entitled “Us against the Wal.” The town’s neighborhood association promised that they “will fight them Wal-Mart tooth and nail” (PNA/Island Aerie Internet Productions, 1995/1996). The increasing opposition indicates that the road ahead for Wal-Mart may not be as smooth as Wal-Mart’s annual report would entail. This requires Wal-Mart to rethink its expansion strategy since it would not be profitable to operate in an unfriendly community. How Big Will Wal-Mart be in Five Years if all continues to go well? — Before he died, Sam Walton expressed his belief that by the year 2000 Wal-Mart should be able to double the number of stores to about 3,000 and to reach sales of $125 billion annually. Walton predicted that the four biggest sources of growth potential would be the following: 1. Expanding into states where it had no stores; 2. continuing to saturate its current markets with new stores; 3. Perfecting the Super-center format to expand Wal-Mart’s retailing reach into the grocery and supermarket arena — a market with annual sales of about $375 billion; 4. Moving into international markets (Thompson & Strickland, 1995). Wal-Mart Super-centers represent leveraging on customer loyalty and procurement muscle in order to create a new domestic growth vehicle for the company. With few locations left in the U.S. to put a new Sam’s Club or traditional Wal-Mart, the Super-center division has emerged as the domestic vehicle for taking Wal-Mart to $100 billion in sales. Before the Super-center, Walton experimented with a massive “Hyper-mart”, encompassing more than 230,000 square feet in size. The idea failed. Customers complained that the produce was not fresh or well presented and that it was difficult to find things in a store so big that inventory clerks had to wear roller skates. One of Walton’s philosophies was that traveling on the road to success required failing at times. As a result of the unsuccessful experiment, Walton launched a revised concept: the Super-center, a combination discount and grocery store that were smaller than the Hyper-mart. The Super-center was intended to give Wal-Mart improved drawing power in its existing markets by providing a one-stop shopping destination. Super-centers would have the full array of general merchandise found in traditional Wal-Mart stores, as well as a full-scale supermarket, delicatessen, fresh bakery, and other specialty shops like hair salons, portrait studios, dry cleaners, and optical wear departments. Super-centers would measure 125,000 to 150,000 square feet, and target locations where sales per store of $30 to $50 million annually were feasible. Walton’s prediction was right on target. The Super-center division more than doubled in size during 1993, then doubled again in 1994. Super-centers, once thought of as risky because of slim profit margins on the food side, will most likely make Wal-Mart the nation’s largest grocery retailer within the next five to seven years (Longo, 1994). Expanding overseas, Wal-Mart moved into the international market in 1991 through a joint-venture partnership with CIFRA S.A. de C.V., Mexico’s leading retailer. Since then the company has entered Canada, Hong Kong, Mainland China, Puerto Rico, Argentina, and Brazil. The Wal-Mart International Division was officially formed in 1994 to manage the company’s international growth. By the year 2005, analysts expect Wal-Mart to be a huge international retailer, with numerous locations in South America, Europe, and Asia. The ever-changing market presents continuing challenges to retailers. First and foremost, retailers must recognize the strong implications of a “buyers’ market” (Lewison, 1994). Customers are being offered a wide choice of shopping experiences, but no one operation can capture them all. Therefore, it is incumbent upon management to define their target market and direct their energies toward solving that specific market’s problems. Technology, demographics, consumer attitudes, and the advent of a global economy are all conspiring to rewrite the rules for success. Success in the decade will depend upon the level of understanding retailers have about the new values, expectations, and needs of the customer. If Wal-Mart continues its customer-driven culture, it should remain a retail industry leader well into the next century. It serves more than 100 million customers weekly in all of the 50 states, plus Puerto Rico, Canada, China, Mexico, Brazil, Germany, United Kingdom, Argentina, and South Korea. Wal-Mart’s current operating numbers are: Wal-Mart Stores 1,640 SuperCenters 1,077 SAM’s Clubs 501 Wal-Mart Neighborhood Markets 31 Wal-Mart International Units 1072 Distribution Centers 62 Total Worldwide Associates 1,240,000 Wal-Mart’s financial numbers have grown substantially as well. At the end of the fiscal year 2000, total company sales reached $191 billion dollars. This was an increase over the previous year of 15.9%. Total international sales amounted to $32 billion dollars at the end of the 2000 fiscal year, which was an increase of 41% over the previous year. Wal-Mart is widely recognized as one of the leading discount variety store chains. It is the nations largest discount department store chain, and also one of the largest discounters in the nation in terms of sales dollars. Financial DataWal-Mart’s financial information Wal-Mart’s stock has consistently done well for investors. From the period 1995 until the present, the stock rose consistently to the point where it split in March of 1999 and peaked in December of that year. It held its footing relatively well after the bearish market activity of 2000 with a market capitalization higher than that of any other company in the discount variety store industry. During the fiscal year ended January 31, 2002, Wal-Mart had net sales of $217.8 billion (Wal-Mart Annual Report, 2001). The price-earnings ratio remains a little high at 33.5 given their large market capitalization. Investor’s like Wal-Mart’s stock especially since its beta is almost one, which means it is a good stock to have in your portfolio in turbulent times in the market. Wal-Mart’s earnings-per-share are most recently about $1.40/sh, about half that of Sears (a notoriously low growth/high dividend stock) but with a commendable 16% 10 year EPS growth rate. As for dividends, Wal-Mart paid about $0.28 per share with a decent 18.9% 10-year dividend growth rate. Wal-Mart’s latest annual revenue is approximately 200 billion, about 5 times that of their closest competitor Sears. Wal-Mart’s income growth trends are some of the best in their industry. They continue to be on the upswing and are practically killing companies like K-mart, who have had consistently negative growth over the past five years. Wal-Mart’s latest annual income was over 6 billion dollars with 15.9 percent income growth over a 10-year stretch. While many of their competitors are in the negative growth phase, Wal-Mart continues to become even more dominant in the industry. Revenue and growth don’t always tell the whole story. There are much better ways to measure a company’s financial strength such as return on equity, debt/shareholder equity ratio, and net profit margins. There are no foreseeable problems with the net profit margins of approximately 3% (net profit margins are management’s ability to turn sales into profits). At a current debt/equity ratio of .85 Wal-Mart has about 46% equity and 54% debts, which is tolerable but could be improved. Wal-Mart is the undisputed industry leader in the discount variety story sector. They consistently show good financial numbers. The only concern may be their increasing trend in using debt financing. They may have a very good reason for it since their market cap is already so high. Issuing more shares is sure to increase their price-earnings ratio as well as possibly decrease their stock price. However the company is still in good overall financial shape. Stock Split HistoryStock Split HistoryIncorporation date – 10/31/69 Stock went public – 10/01/70 In 1970, Wal-Mart offered 300,000 shares of its common stock to the public at a price of $16.50 per share. Since that time, we have had eleven (11) two for one (2/1) stock splits. On a purchase of 100 shares at $16.50 per share on our first offering, the number of shares has grown as follows: 2-for-1 Stock SplitsSharesCost per ShareMarket Price On Split DateRecord DateOn the offering10016.50May 19712008.25$47.0005/19/71March 19724004.12547.5003/22/72August 19758002.0623.0008/19/75November 198016001.0350.0011/25/80June 19823200.05249.87506/21/82June 19836400.025581.62506/20/83September 198512,8000.127549.7509/03/85June 198725,6000.062566.62506/19/87June 199051,2000.0312562.5006/15/90February 1993102,4000.01562563.62502/02/93March 1999204,8000.007812589.7503/19/99Strategies and InnovationsCorporate structure Wal-Mart’s corporate strategies are simple foundational guidelines on how the store conducts business. The first objective is: “customers would be provided what they want, when they want, at a value.” Second: “treating each other as we would hope to be treated, acknowledging our total dependency on our Associate-partners to sustain our success.”1 Both of these strategies are a tribute to Wal-Mart’s mission to serve its customers a good value. The corporate structure is constantly innovating forward, because as soon as Wal-Mart thinks that company can settle, profits and success will die as an outcome. Charged with this mentality Wal-Mart has made several innovations in its time. Most are familiar with SAMS Clubs, Supercenters, and the pharmacies, which make up some of the more successful innovations of the past two decades. Wal-Mart is continuing to innovate by refurbishing old stores and testing new stores such as a drive through grocery store. Much of the changes occur domestically because Wal-Mart is still growing faster in North America than in any other part of the world. This is not to suggest that the company is overlooking international growth, which has been substantial on its own. Wal-Mart’s goal on an international corporate level is to become an international brand name similar to Disney and Coke. Wal-Mart is achieving this goal by strategically expanding into markets in each continent being conscience of each country’s culture. This growth will require an expanded distribution that will encompass the world. Any market that to be tapped will still follows the principles of honest business on which Sam Walton founded the company on. Structure and Controls Wal-Mart provides its customers with a vast selection of quality products at low prices through its use of an inventory control system and its dealings with suppliers. The buying power Wal-Mart possesses gives it an advantage over small retailers in product pricing. Wal-Mart’s use of its inventory system provides its customers with the products they want when they want it, which reassures its customers of a vast product mix. Wal-Mart and its subsidiaries have over 3400 stores that make for an impressive amount of buying power. Buying large amounts of inventory allows Wal-Mart to obtain products at a lower cost than smaller retailers. Wal-Mart also has considerable influence with its suppliers for best price, delivery terms, promotion allowances and continuity of supply because in many areas it is the dominant distributor. Wal-Mart has a policy of only doing business with the top sales executives of suppliers. Wal-Mart has also been accused of threatening its suppliers if they didn’t sell directly to Wal-Mart, it would go to another supplier. The savings Wal-Mart receives from its suppliers is passed on to its customers, giving Wal-Mart a price advantage over its competitors. Wal-Mart not only has cost savings with its aggressive dealings with suppliers, but also with its inventory-control system. Wal-Mart has a computer controlled inventory system that logs every item sold at the checkout counter. The information produced by this system automatically informs the warehouses of merchandise to be ordered, and where to place those items. The system keeps track of sales information that alerts management to sales trends, allowing Wal-Mart to keep more inventories on hand that customers want. This system also allows Wal-Mart to reduce its over all amount of inventory, which produces a savings that can be passed on to its customers. Using this system has allowed Wal-Mart to speed up the time it takes to replace items on the shelves, which prevents the possibility that customers will have to go elsewhere to find the products they want. Wal-Mart not only uses controls to help its product pricing but also uses them to affect its store personality. Customer Satisfaction and Employee TrainingWal-Mart places priority on customer service in the way it does business. Wal-Mart uses people greeters to make customers feel welcome in its stores. Rules have also enhanced customer service such as the Sundown Rule, which states, “Why put off until tomorrow what you can do today”. Wal-Mart also uses the 10ft attitude, which means that whenever an employee comes in contact with a customer they should greet that customer and offer assistance. The structure and controls that Wal-Mart has in place enable it to achieve the objectives and goals of the company from product pricing to customer service. Wal-Mart not only has controls for customers but also employees such as, using the term associates helps Wal-Mart achieve its customer goals by making its employees feel part of a team. This team works together towards Wal-Mart’s goals and objectives. The direction for Wal-Mart’s future is focused on increased customer satisfaction and service, introducing new types of stores, and expanding on their distinctive competency of distribution. Each direction has been analyzed for possible success and although each idea for continued growth might lead to substantial gains, only the most successful ideas will carry a recommendation. Certain ideas, while possibly being beneficial to Wal-Mart if instituted, are not the best ones to be implemented. Two directions that were not used are improved employee training and the introduction of chain that would cater to a new market. Improved employee training was eliminated as a recommendation when it was determined that it could not provide a significant benefit to the company. The idea of opening a chain that caters to an upscale market was eliminated because it could conflict with Wal-Mart’s mission of providing low cost to customers. It also would have been difficult to separate this new chain from the image of Wal-Mart that currently exists, and could have the potential to take away sales from the current stores. Wal-Mart currently is doing very well. Sales have increased substantially over the last year both domestically and internationally, and the company serves more than 100 million customers every week. Wal-Mart’s future is very bright. However, there are recommendations that when instituted, would allow for added profit, customer satisfaction, and company expansion. Customer satisfaction and service are key areas where improvements can lead to increased profits and an increased customer base. Wal-Mart should strive to improve its current stores to be more appealing for the customer and to make the shopping experience more pleasing. To make locating items easier in the stores, Wal-Mart should place interactive computer stations at various strategic areas in the store that allow a customer to search the store using a touch screen computer. Once the information is entered, the station should tell the customer where the item is located in the store in relation to their current location. A possible extension of this recommendation is a portable handheld computer that allows a customer with disabilities to search the store with the least amount of difficulty. The store itself should be remodeled to decrease the cheap warehouse feeling normally associated with Wal-Mart. This can be done by installing brighter and more focused lighting, using brighter colors to decorate the store, having more carpeted areas, hanging posters of famous brand name products, and upgrading employees uniforms to consist of more than just vests (i.e. polo shirts). The shopping experience would feel more “upper class”, and customers will not feel that they are settling for less. In order to reduce customer waiting and frustration at checkout, Wal-Mart should decrease the amount of items needed to use the Express Lane checkout.Moving from the retail level to business relationships, Wal-Mart has extensive opportunities to expand on its distinctive competency of its distribution system. The company has strategically placed distribution centers all over the US close to its stores. This not only makes for an excellent venue to supply Wal-Marts, but other companies’ stores as well. Wal-Mart Inc. can be a competitive distributor that would service companies not in direct competition with Wal-Mart. Wal-Mart Timeline1960s1962Company founded with openin2 of first Wal-Mart in Roaers. Ark.
1967Wal-Mart’s 24 stores total $12.6 million in sales.
1968Wal-Mart moves outside Arkansas with stores in Sikeston, Mo., and Claremore, Okla.
1969Company incorporated as Wal-Mart Stores, Inc. on Oct. 31.
1969Wal-Mart Aviation hires its first full-time pilot. givina co-founders Sam and Bud Walton some help.
1970s1970Wal-Mart opens first distribution center and home office in Bentonvile, Ark.
1970Wal-Mart stock first traded over the counter as publicly-held company.
197038 stores now in operation with sales at $44.2 million. Total number of associates is 1,500.
1971First 100 percent stock-split in May. Market price: $47.
1971Wal-Mart is now in five states: Arkansas, Kansas, Louisiana, Missouri and Oklahoma.
1972Wal-Mart approved and listed on the New York Stock Exchanae.
1972Second 100 percent stock split in March. Market price: $47.50.
1973 Wal-Mart enters Tennessee.
1974Wal-Mart stores now in Kentucky and Mississippi.
1975125 stores in operation with sales of $340.3 million and 7,500 associates. Wal-Mart enters ninth state: Texas.
1975Third 100 percent stock split in August. Market price: $23.
1975Inspired by workers he saw on a visit to Korea, Sam Walton introduces the famous “Wal-Mart Cheer” to associates.
1977Wal-Mart makes first acquisition, 16 Mohr-Value stores in Michigan and Illinois.
1977Wal-Mart enters its 10th state: Illinois.
1978Huteheson Shoe Company acquired; Wal-Mart pharmacy, auto service center and jewelry divisions introduced.
1979Wal-Mart is the first company to reach $1 billion in sales in such a short period of time: $1 .248 billion. Wal-Mart now has 276 stores, 21,000 associate and are in its 11th state: Alabama.
1980s1980Fourth 100 percent stock split in November. Market price: $50.
1980Largest distribution center to date opens in Palestine, Texas.
1981Wal-Mart enters Georgia and South Carolina.
1981Wal-Mart makes its second acquisition with 92 Kuhn’s Big K stores.
1982Fifth 100 percent stock split in June. Market price: $49.8 75.
1982Wal-Mart enters Florida and Nebraska.
1983U.S. Woolco Stores acquired.
1983First SAM’S CLUB opened in April in Midwest City. Okla.
1983People Greeter implemented at all stores.
1983First one-hour photo lab opened in Tulsa, Okla.
1983Sixth 100 percent stock split in June. Market price: $8 1.625.
1983Wal-Mart enters Indiana, Iowa, New Mexico and North Carolina.
1983For eighth year straight Forbes Magazine ranks Wal-Mart No. 1 among general retailers.
1984Sam Walton does the hula at high noon on Wall Street. making good on promise to associates after company achieves pre-tax profit of 8 percent in1983.
1984David Glass named company president.
1984Wal-Mart enters Virginia.
1985Seventh 100 percent stock split in September. Market price:$49.75.
1985Wal-Mart has 882 stores with sales of $8.4 billion and 104,000 associates. Company adds stores in Wisconsin and Colorado.
1985Grand Central Stores acquired.
1986Wal-Mart enters Minnesota.
1987Eighth 100 percent stock split in June. Market price: $66.625.
1987Wal-Mart’s 25th anniversary: 1,198 stores with sales of $15.9 billion and 200,000 associates.
1987Wal-Mart Satellite Network (largest private satellite communication system in the U.S.) completed, linking all operating units of company and General Office with 2-way voice, data and one-way video communication.
1988David Glass named chief executive officer of Wal-Mart Stores. Inc.
1988First Supercenter opened in Washington, Mo.
1988Ninety percent of Wal-Mart stores have bar-code scanning capabilities.
198816 Wal-Mart distribution centers in operation.
1988Supersaver units acquired.
1989Wal-Mart is now in 26 states with the addition of Michigan, West Virginia and Wyoming.
1990s1990Wal-Mart becomes nation’s No. I retailer.
1990McLane Company of Temple, Texas acquired.
1990Wal-Mart enters California, Nevada, North Dakota, Pennsylvania, South Dakota and Utah.
1990Wal-Mart Visitor’s Center opens on site of Sam Walton’s original Walton’s 5-10 stores.
1990Ninth 100 percent stock split in June. Market price: $62.50.
1991Western Merchandisers, Inc. of Amarillo, Texas, acquired.
1991Wal-Mart enters Connecticut, Delaware, Maine, Maryland, Massachusettes, NewHampshire, New Jersey and New York.
1991″Sam’s American Choice” brand products introduced.
1991International market entered for first time with the ovemng of a unit in Mexico City.
1992President George Bush uresents Sam Walton with the Medal of Freedom.
1992Sam Walton passes away April 5.
1992S. Robson Walton named chairman of the board April 7.
1992Wal-Mart has entered 45 states with the addition of Idaho, Montana and Oregon.
1992Wal-Mart enters Puerto Rico.
1993Wal-Mart International division formed with Bobby Martirr as president.
1993Tenth 100 percent stock split in February. Market price: $63.625.
1993Wal-Mart enters Alaska, Hawaii, Rhode Island and Washington.
1993First billion-dollar sales week in December.
199391 Pace Warehouse clubs acquired.
1994122 Woolco stores in Canada acquired.
1994A prototype store designed to be as environmentally friendly as possible opens in Lawrence, Kansas.
19943 value clubs open in Hong Kong. Canada has 123 stores and Mexico has 96.
1994Code Adam program implemented, named after Adam Walsh, in all stores.
1995James Lawrence “Bud” Walton.(right. pictured with brother Sam Walton) Co- Founder. Gasses away.
1995Wal-Mart Stores, Inc. has 1,995 Wal-Mart stores, 239 Supercenters, 433 SAMS CLUBS and 276 International stores with sales at $93.6 billion and 675,000 associates.
1995Wal-Mart enters its 50th state – Vermont – and builds three units in Argentina and five in Brazil.
1996Wal-Mart enters China throuah a joint-venture aareement.
1997Wal-Mart becomes the No. 1 employer in the United States with680,000 associates, as well as an additional 115,000 international associates.
1997Wal-Mart Stores, Inc. serves more than 90 million customers a week worldwide.
1997Wal-Mart replaces Woolworth on the Dow Jones Industrial Average.
1997Wal-Mart has first $100 billion sales year, with sales totaling $105 billion.
1997Wal-Mart introduces OneSource nutrition centers.
1998Wal-Mart acquires 21 Wertkauf units in Germany.
1998Wal-Mart introduces Neighborhood Market concept with three stores in Arkansas.
1998Wal-Mart exceeds $100 million in annual charitable contributions, with donations totaling $102 million.
1998Wal-Mart enters Korea through a joint venture agreement.
1999Wal-Mart has 1,140,000 associates, making the company the largest privateemployer in the world.
1999Wal-Mart acquires 74 Interspar units in Germany.
1999Eleventh 100 percent stock split in March. Market price: $89.75.
1999Wal-Mart acquires the ASDA Group vlc. in the United Kingdom (229 stores).
1999Wal-Mart ranked #1 Corporate Citizen in America in the 1999 Cone/Roper Report, an annual national survey on philanthropy and corporate citizenship.
2000s2000Wal-Mart ranked 5th by FORTUNE magazine in its Global Most Admired All-Stars list.
2000H. Lee Scott named president and CEO of Wal-Mart Stores. Inc.
2000Wal-Mart ranked #1 Corporate Citizen in America in the 2000 Cone/Roper Report, an annual national survey on philanthropy and corporate citizenship.
2001Wal-Mart named by FORTUNE Magazine as the 3rd most admired company in America.
2001Wal-Mart ranked by Hispanic Business Magazine as one of the Top 25 Diversity Recruitment Programs in 2001 for its aggressive program to hireand promote Latinos.
2001Wal-Mart has the biggest single day sales in history: $1.25 billionSummaryThe ever-changing market presents continuing challenges to retailers. First and foremost, retailers must recognize the strong implications of a “buyers’ market” (Lewison, 1994). Customers are being offered a wide choice of shopping experiences, but no one operation can capture them all. Therefore, it is incumbent upon management to define their target market and direct their energies toward solving that specific market’s problems. Technology, demographics, consumer attitudes, and the advent of a global economy are all conspiring to rewrite the rules for success. Success in the next decade will depend upon the level of understanding retailers have about the new values, expectations, and needs of the customer. If Wal-Mart continues its customer-driven culture, it should remain a retail industry leader well into the next century.
BibliographyBibliography1. And the winner is still . . . Wal-Mart. Fortune, pp. 62-68. Slezak, M. (1993).
2. Competing on capabilities: the new rules of corporate strategy. Harvard Business Review, pp. 55-70. Thompson, A. A., Jr. & Strickland, A.J. III. (1995).
3. Daugherty, R. (1993). New approach to retail signals strong future for point of purchase displays. 4. http://wal-mart.com5. New generation of exec’s leads Wal-Mart into the next century. Discount Store News, pp. 45-47. PNA/Island Aerie Internet Productions (1995/1996).
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8. Sam Walton: The inside story of America’s richest man. New York: Dutton. Vance, H. Trimble. (1990). 9. Seeds of “environmental store” planted in 1989. Discount Stores Inc., pp. 25-27. Stalk, G., Evans, P., Shulman, L. (1992, March-April). 10. Superstores and Smallness. Discount Merchandiser, p. 8. Wal-Mart Stores, Inc. (1995). 11. Strategic management concepts and cases (8th ed.). Chicago: Irwin. Trimble, V. H. (1990).
12. Us against the Wal. Gig Harbor, Washington: Peninsula Neighborhood Association. Online Available: http://www.harbornet.com/pna/. Saporito, B. (1994, May).
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Bibliography1. And the winner is still . . . Wal-Mart. Fortune, pp. 62-68. Slezak, M. (1993).
2. Competing on capabilities: the new rules of corporate strategy. Harvard Business Review, pp. 55-70. Thompson, A. A., Jr. & Strickland, A.J. III. (1995).
3. Daugherty, R. (1993). New approach to retail signals strong future for point of purchase displays. 4. http://wal-mart.com5. New generation of exec’s leads Wal-Mart into the next century. Discount Store News, pp. 45-47. PNA/Island Aerie Internet Productions (1995/1996).
6. Paperboard Packaging, pp. 24-27. Lewison, M. D. (1991).
7. Retailing. New York: Macmillan. Longo, D. (1994).
8. Sam Walton: The inside story of America’s richest man. New York: Dutton. Vance, H. Trimble. (1990). 9. Seeds of “environmental store” planted in 1989. Discount Stores Inc., pp. 25-27. Stalk, G., Evans, P., Shulman, L. (1992, March-April). 10. Superstores and Smallness. Discount Merchandiser, p. 8. Wal-Mart Stores, Inc. (1995). 11. Strategic management concepts and cases (8th ed.). Chicago: Irwin. Trimble, V. H. (1990).
12. Us against the Wal. Gig Harbor, Washington: Peninsula Neighborhood Association. Online Available: http://www.harbornet.com/pna/. Saporito, B. (1994, May).
13. Wal-Mart: a history of Sam Walton’s retail phenomenon. New York: Twayne. Verdisco, R. J. (1994, October). 14. The story of Wal-Mart. Bentonville, Arkansas: Corporate Offices of Wal- Mart Stores, Inc. Wal-Mart Annual Report, 20011.
